Letter: Don’t be fooled – Ill. a low-tax state

Despite the beautiful weather over the Fourth of July weekend, elderly retirees in Illinois were anxious, waiting for the decision of a legislative committee on how much their pensions will be reduced on top of the significant increases in health insurance costs already imposed. The wait is agonizing because many retirees are totally dependent on their modest pensions; most state jobs are not covered by social security.

One policy option for solving the pension problem has been pointedly ignored, increasing revenue to repay the money the state took, irresponsibly, from the pensions. Political figures and commentators erroneously claim that state is already highly taxed so that a revenue increase for repayment of the debt to the pensions is off the table.

But the reality is that Illinois is a comparatively low-tax state.

How can people claim that Illinois’s tax burden is high yet be wrong?

The answer is they are using data from the Tax Foundation, an organization that encourages states to compete with one another to lower taxes regardless of state deficits or the needs of the citizens. The claim that Illinois is a high-tax state comes from reports in newspapers that cite the Tax Foundation.

There is another, more neutral source of data. State tax administrators collect data in each state and report it online at http://www.taxadmin.org/fta/rate/burden.html. This organization does not advocate any policy; it just reports on the numbers.

Their most recent data (from 2010) compares the tax burden state by state. Tax burden is calculated by adding together taxes and fees paid to the state and localities and dividing by income. Using tax administrators’ data, Illinois ranks 42nd among the states. Illinois has one of the lowest tax burdens in the country.

While changes are needed in the Illinois state pension plans, there is no need for the state to renege on obligations to those already retired. The state can raise revenue, pay its bills and still maintain its relatively low tax burden.